Applying LCM to the items that make up ending inventory is an application of which of the following concepts?
A)Materiality
B)Conservatism
C)Reliability
D)Full disclosure

Question

Quizplus · Accepted Answer

Applying LCM (lower of cost or market) to ending inventory is an application of conservatism principle, which requires accountants to report potential losses in inventory value immediately, even if the actual loss has not yet occurred. This means that if the market value of inventory falls below its recorded cost, the value of inventory is reduced to market value to reflect the principle of conservatism.

Applying LCM to the Items That Make Up Ending Inventory